Venture capital firms invested $243 million in 23 deals in the San Diego area during the first quarter that ended in March, according to data from the MoneyTree Report from PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters.
It was a strong upturn in the amount of capital invested, representing a 67 percent increase over the $145.5 million that VCs invested in San Diego startups during the previous quarter, and a 20 percent rise over the $203 million invested during the first quarter of 2013, according to MoneyTree Data.
The deal count remained more or less comparable. There were 24 deals in the previous quarter, and 27 in the same quarter of 2013.
About $215 million—or nearly 89 percent of the total invested in the region during the quarter—went into 15 life sciences companies.
In the single biggest deal of the quarter, San Diego’s Lumena Pharmaceuticals raised $45.5 million from Alta Partners, New Enterprise Associates, Pappas Ventures, RA Capital Management, RiverVest Venture Partners, and Adage Capital Management. The three-year-old company, founded to develop new oral drugs for treating a rare group of metabolic disorders and liver diseases, recently filed for an IPO.
A new San Diego startup called Human Longevity Inc. (HLI) made the list, but without much information. HLI is a genetic services startup founded by the genetic entrepreneur J. Craig Venter, former Celgene executive Robert Hariri, and Peter Diamandis of the X Prize Foundation. Venter told reporters in early March that HLI had raised $70 million in a funding round led by … Next Page »Comments | Reprints | Share:
UNDERWRITERS AND PARTNERS
Right out of the gate, venture capital funding surged nationwide during the first three months of 2014—driven largely by substantial investments in expansion-stage IT and software companies, according to the MoneyTree Report being released today.
Eight of the ten biggest deals involved IT, software, or Web companies based in Northern California. (The top 10 deal list is below.)
VCs invested almost $9.5 billion in U.S. startups during the first quarter—marking the largest amount of venture capital deployed since the second quarter of 2001. It was 12 percent more than the $8.4 billion venture firms invested during the previous quarter, and 57 percent more than the $6 billion that VCs invested during the first quarter of 2013, according to MoneyTree data.
The first-quarter deal count was relatively modest at 951, or down 14 percent from the 1,112 deals in the previous quarter, and only marginally higher than the 916 deals counted in the same quarter of 2013. But the deal count also offered the biggest clue to interpreting the MoneyTree data.
“Software by itself is a relatively capital-efficient category,” according to John Taylor, who helps to produce the MoneyTree Report as director of research at the National Venture Capital Association NVCA). In 2012, for example, the venture industry was making a lot of small investments in early stage software companies. “What we’re now talking about are companies moving from seed to expansion stage rounds,” Taylor said during a phone interview yesterday.
Software got more venture funding than any other sector—just over $4 billion, or more than 42 percent of the entire $9.4 billion venture firms invested during the quarter. That represented a 39 percent increase over the fourth-quarter of 2013, when VCs invested almost $2.9 billion in 409 software deals. The MoneyTree Report counted 414 software deals during the first quarter.
The MoneyTree Report is a quarterly survey of venture activity, prepared by the NVCA and PricewaterhouseCoopers, based on … Next Page »Comments | Reprints | Share:
Shares of San Diego’s Vital Therapies (NASDAQ: VTL) traded slightly above its IPO price this morning, in the company’s first day of trading.
The biotherapeutic company raised $54 million in its initial public offering, after pricing 4.5 million shares last night at $12 per share, for an initial market cap of approximately $253 million. That was below the $13 to $15 range the company had set in a recent regulatory filing.
Vital Therapies, founded in 2003, has developed an artificial liver support system that uses human liver-derived cells to augment the metabolic functions of a patient’s liver, enabling the patient’s own liver to recover or providing a bridge to transplant.
The company’s plans for an IPO were first disclosed in regulatory filings last November, when the company planned to raise about $75 million. But a sharp slowdown in Wall Street’s appetite for biotech IPOs led Vital Therapies to postpone its IPO, and the company had to adjust its expectations. When the company recently revived its IPO plans, the filings show it intended to raise about $63 million.
In February, Vital Therapies raised $12 million from an undisclosed venture investor.Comments | Reprints | Share:
With the arrival of next-generation gene sequencing machines like the Illumina (NASDAQ: ILMN) HiSeq X Ten, medicine has been moving to develop new ways of using genomic data to treat patients. Last month, for example, J. Craig Venter unveiled plans to sequence the entire genome of every patient entering the UC San Diego Moores Cancer Center as an initial goal for his latest startup, Human Longevity Inc.
At the same time, though, it’s becoming clear that generating genomic data for thousands of cancer patients involves working with very large numbers—and that means a wave of new opportunities for innovation are emerging as genomics and Big Data come together. One startup moving to catch this wave is Edico Genome, a San Diego startup founded last year to fix a bottleneck in the way the data being generated by the HiSeq X Ten and other next-generation sequencing machines is processed.
Edico has developed a specialized computer processor for ordering the readout of nucleotides—A, C, T, or G—from short segments of DNA generated by next-generation sequencing technology so they align with a reference genome. It’s a process that genomics specialists refer to as “mapping.”
It is a Big Data problem. The human genome consists of roughly 3.2 billion nucleotide base pairs (made of that four-letter alphabet of DNA) that encode between 20,000 and 25,000 genes. Next-generation sequencing technology cuts the DNA molecule into millions of short segments to “read” the sequence and digitize the results. What comes out is a very large data file that can range from 150 gigabytes to more than 320 gigabytes. An average-size, 200-gigabyte data file would be roughly equivalent to 800 big city phone books—from the days when people used their phone books.
But the data file still consists of millions of segments of DNA that must be mapped to a reference genome. Think of throwing 800 telephone books into a paper shredder, and then trying to reassemble the millions of strips to make sense of the information.
Today, companies like Illumina use clusters of computer servers to map these random DNA segments with a reference genome—a process that typically takes about 20 hours, depending on … Next Page »Comments (1) | Reprints | Share:
HardTech Labs, a San Diego accelerator program that gives startups access to low-cost manufacturing in Tijuana, has selected four companies to serve as a beta class. The idea is to help the co-founders and mentors identify the skills that are most important to entrepreneurs and to iron out problems.
The cross-border program, announced last month, is a collaborative effort that includes incubators, entrepreneurs, and investors in San Diego, along with manufacturers, innovation experts, and legal and technical consultants in Tijuana. The accelerator is intended to help tech founders take advantage of the low costs and rapid product development processes offered by manufacturers in Baja California—and to boost the regional innovation ecosystems by linking startup communities on both sides of the border.
“We really and truly believe that San Diego should be a tech mecca,” said Derek Footer, a HardTech Labs co-founder who is managing partner of Origo Ventures, a San Diego firm. “We see this as a jobs program for San Diego over the long term.”
The four startups will begin what Footer calls “Class Zero” on May 5. “If you’re a programmer, you always start with zero instead of one,” Footer explained. “Our Class Zero is the class before the real launch of the program.”
The accelerator plans to focus primarily on startups developing consumer products, medical devices, and robotics. Companies selected for the program can remain in the program for as long as a year, depending on their needs and progress, Footer said.
Key pieces of the accelerator include startup mentoring, classes in advanced prototyping, and learning how to tailor a product for manufacturing, Footer said.
The four companies selected for Class Zero are:
—Owaves, founded last August in San Diego, is launching a health, fitness, nutrition, and beauty business. The startup has been developing wearable devices and Web-based software to inspire and motivate people to engage in healthy lifestyle activities.
—LANpie, a Tijuana startup founded last year, is developing an appliance for monitoring local area networks, using the open source Rasberry Pi, a credit-card sized computer, and raspian operating system software.
—CleverPet, a San Diego startup founded by cognitive scientists and behavioral neuroscientists, plans to lift the curtain later this month on a pet learning console—a WiFi-enabled device that rewards pets for solving continuously customized puzzles.
—CryoMedix, a San Diego medical device company, uses liquids maintained under slight pressure to attain temperatures as low as -170 C (-310 F) to destroy tissue and nerves. The company says its cryoablation technology offers the potential for improved clinical outcomes over conventional radio frequency ablation for treating hypertension.
HardTech Labs says it will offer $300,000 in loans that can be converted into ownership stakes to each of the Class Zero companies that completes the program and enters production with one of the accelerator’s contract manufacturing partners.
In a statement, Footer says, “Dedicated funding is clearly a cornerstone of a successful acceleration program. Once we commence our full program later this year, entrance and exit funding will be in place to build on the success of our inaugural class.”
HardTech Labs hopes to enroll 10 startups in its first class, which is expected to begin sometime in September.
The organizations that came together to support HardTech Labs include San Diego’s Ansir Innovation Center, FabLabs San Diego, the Co-Merge Workplace, Origo Ventures, and Tijuana’s Ignitus innovation program and MINK Global, a legal and technical consulting firm.Comments | Reprints | Share:
Much to many entrepreneurs’ chagrin, having an idea is not enough to start a company. Being able to fundraise is just as important as the big idea.
I’ve been very frank in sharing how one of my startup companies failed because I did not have sufficient funding to compete, so I know how long and arduous the fundraising process can be. Most of my entrepreneur friends and I agree that we do not find pitching to investors particularly enjoyable, and at times, it can be wasted effort. But, it remains a necessary evil.
I have only raised seed capital to date and my experiences are unique to what we are building at my company, Retention Science. But after four years, three companies and countless rejections, I did have one swift experience that taught me many valuable lessons about fundraising. I managed to get a “yes” in 24 hours from Mohr Davidow Ventures. Here are five tips for tactics that led to my success this time around.
1) Narrow Your Meeting Hit List
Contrary to popular belief, it’s not wise to pitch to anybody that will take a meeting (though I understand it is hard to say no to meetings early in the process). Your time is just as important as the VC’s and you should only meet with VCs that specialize in your field.
It is also critical to identify the right partner to pitch to within a VC. Every partner has different investment interests, styles and seniority within the firm. Start by targeting the one who is most likely to be interested in your company, as opposed to sending a blanket pitch.
For Retention Science, we listed ourselves on Angel List and received around 25 intro requests, but only took meetings with a select few that made sense for our business. I met with Mohr Davidow Ventures because they have been successful with B2B enterprise companies (InfusionSoft, Rocket Fuel, etc.) and have a known venture partner, Geoffrey Moore, who authored Crossing the Chasm, a respected publication on selling and marketing high-tech products.
2) Don’t Be Contrived
Once you get a meeting, the key to having it go in your favor is to be yourself, which is often easier said than done. You need to relax so you can demonstrate just how knowledgeable you are about the problem you are solving and how excited you are about your solutions.
Investors are trained to see through an entrepreneur’s “smoke and mirrors” and they are good judges of character. This can be intimidating and throw you off. An advisor once recommended I pitch differently in an investor meeting because I look young and my enthusiasm makes me seem desperate. I tried to switch it up a bit and it didn’t feel genuine. During that time, I realized that I only want to partner with an investor who takes me as I am.
When I met Katherine Barr at Mohr Davidow Ventures for the first time, we got along well. I was thorough (and a bit nerdy) about covering the details, and passionate about the company. But I was also quite nervous. I tried to focus on having a genuine conversation instead of giving her a lot of “fluff” in order to impress her. She seemed to appreciate that.
Katherine emailed that night at 10:30 pm asking me to come back the next day to meet the rest of the partners.
3) Carefully Research Potential Investors
Pitching investors is about making a connection and telling a story they can relate to from their own investment experiences. It is not only about the idea; it is about helping the investors to see your vision, size up the market, and, most importantly, foresee a profitable business model. Assuming you already know everything there is about your industry, make sure you thoroughly research everyone you will be speaking to so you can identify ways to connect on a personal level.
After I received an email from Katherine, and subsequently confirmed our meeting time within five minutes (I always wondered if that earned me brownie points or seemed like I was desperately waiting by the phone), I spent the rest of the night researching all of the partners because I did not know exactly which ones I would be meeting. I was up until 3 am reading all of the articles I could find about them, familiarizing myself with their investments, their philosophies, their LinkedIn profiles, and drafting notes and questions.
I ended up meeting four partners total, and since I had done my homework, I modified my pitch a bit to reflect those partners’ investments and professional experiences. It worked.
4) Release Your Control on Timing
Timing is everything in life, and it is the same for fundraising. If you happen to meet with a VC who just had a successful investment with a company that is similar to yours, then you are in luck. But if they just got out of a crappy board meeting, you might not have their full attention and you will see it on their faces. Do a little casual probing before you sit down with them to gauge their mind frame before you launch into your pitch, and adjust as needed.
Also, VCs are very busy and it is difficult to get all of them into one room to agree on making an investment and, often times, that is a main reason decision-making is delayed. I felt incredibly lucky that all of the partners that needed to weigh in on the decision were available to meet with me on such short notice the next day. This is a rare event, and it’s more likely that you’ll have to sit on your hands and wait for the partners to find time to meet and get back to you. Avoid obsessively calling or emailing to check the status. Persistence is good, but it quickly morphs into annoyance.
After I met with all of the partners, Katherine invited me to wait. I expected her to provide feedback and let me know about next steps. Instead, she returned in 20 minutes and told me “they are in.” That is the best feeling a startup founder can ever experience.
5) Follow Up Diligently—You Are Not Done Yet!
This is not rocket science, yet many entrepreneurs drop the ball during closing. Just because a partner verbally committed that they will invest, nothing is final until the papers are signed and money is in the bank.
Make sure you diligently and directly answer all of the requests that might come your way—investors take everything into account. And I bet that they are taking notes on how you are responding to their additional requests, and handling the final steps of the fundraising process. Expect to receive numerous follow-up requests of all types, and respond to them thoroughly, timely and professionally.
As cliché as it sounds, I agree with the analogy that raising money is like getting married. Fundraising is not about just raising funds—it is about raising funds from the right partners. Katherine and I share a similar outlook on work and life, and her immediate support told me that she was the right partner to help me build my company over the long term.
The result? Well, for me, I will always remember the next time I saw Katherine after we officially closed our funding round. I awkwardly extended my hand to give her a handshake, and she said “come on dude, give me a hug.” Now that is a true partnership.Comments (2) | Reprints | Share:
Venture capital firms have long nurtured biotechnology startups that make use of discoveries from non-profit research centers—but the roster of such VC firms has been shrinking. To fill the gap in that financial ecosystem, both research institutions and pharmaceutical companies have been trying out new roles—and meeting each other in the middle.
The Scripps Research Institute in La Jolla, CA, has just unveiled an unusual new standalone drug discovery company it has created: Scripps Advance, which has already founded one startup.
Scripps Advance was also designed as a vehicle to support collaborations with pharmaceutical companies looking for promising early stage projects. It has signed its first deal with the Johnson & Johnson Innovation Center in California—a Menlo Park, CA-based branch of the international scouting initiative J&J created to keep its drug pipeline filled.
“Pharma is investing earlier in product development cycles,” says Scott Forrest, vice president of business development at Scripps. “They don’t stand by while an ecosystem dries up.”
Under the collaboration with the J&J unit, the new Scripps initiative will receive upfront funding (the amounts aren’t being disclosed). The J&J organization will also earmark further money to move a selected number of lab discoveries closer to commercialization, Forrest says.
In addition to funding, J&J’s Innovation Center will also provide guidance to lab scientists—possibly even some specific work plans designed to clear up uncertainties and risks that would make a big drug company hesitate to support or license new technology, says Thorsten Melcher, senior director of new ventures and partnerships at the Innovation Center in Menlo Park (pictured above).
The J&J center is a communications and dealmaking hub that can tap the interests of other Johnson & Johnson units, such as its R&D organization and its venture capital subsidiary, Johnson & Johnson Development Corporation, Melcher says. It can arrange for R&D collaborations, mentoring relationships, equity financing deals, and the formation of startups. The California Innovation Center has already formed relationships with other academic institutions in the state, including UC San Francisco and Stanford University.
“New company formation is down, so we feel we need to be more active in the earlier stages,” Melcher says.
The creation of Scripps Advance marks a turning point in Scripps’ method of interacting with pharmaceutical company partners, Forrest says. In the past, Scripps had formed five-year “first rights” collaborations with a single drug company at a time, such as Pfizer and Novartis. That company gained the right to license any technology at the institute, in exchange for financial support of about $100 million to $125 million, Forrest says.
But it was left almost to chance whether the academic lab projects matched the drug company’s interests, Forrest says. The Scripps Research Institute was free to partner up with other pharmaceutical companies on technology that the “first rights” partner had turned down. But once that happened, outside companies could get the impression that the project was “subpar,” he says. It was a form of what the venture investing community sometimes calls “signaling risk.”
“Not everything got snapped up,” Forrest says.
Now, Scripps Advance plans to form … Next Page »Comments | Reprints | Share:
The day that iPad users and Microsoft Office suite lovers have been waiting for has finally arrived. Now the fate of dozens of third-party applications like Prezi and SlideShark hang in the balance.
In a break with tradition, Microsoft CEO Satya Nadella announced the release of Office iPad on March 27. Under former CEO Steve Ballmer, Microsoft protected its Windows franchise by first launching software on its own operating system, though Ballmer did eventually make the decision to ship Office for the iPad. With this move, Microsoft has moved Windows beyond its own product domain, and expanded further into the tablet market.
Does this mean that Microsoft is no longer prioritizing its own operating system? Not likely, according to Tab Times contributor Don Reisinger. However, Nadella made it clear that he would like to focus on cloud and mobile capabilities for Windows in the future. Until he has time to dive into these objectives, Nadella is approaching iOS with a new outlook.
Before Ballmer stepped down as CEO, he hinted that Microsoft was already considering rolling out Office for Apple products. Word of this rumor broke in the fall of 2013. It’s taken almost six months for the idea to evolve into a reality, and there’s no telling how long Microsoft had been mulling over the concept. Now, the time has finally come to see Office and the iPad in action.
Contrary to much of the news that you hear coming out of Silicon Valley, it’s a bit premature to compose the eulogy for Office. More than 1 billion people around the world use Microsoft Office, most on a daily basis. As of 2011, approximately 100 million licenses 2010 have been sold, and Office generates nearly a third of Microsoft’s product revenue.
The fact of the matter is that today’s generation of enterprise leaders grew up with Office—it’s in their DNA. People crunch their numbers and tell their stories with Microsoft Office, and professionals at large corporations are going to be using Excel, Word, and PowerPoint until the day they retire. I understand them because enterprise leaders are my customers too.
Many people believe that Microsoft is late to … Next Page »Comments (1) | Reprints | Share:
[Corrected 4/14/14, 6:13 pm. See below.] Facebook is aiming to become a telco. Drones are the towers. Oculus are the phones. WhatsApp is the service.
Twenty-one billion dollars is cheap for a next-generation telco. There is more behind the WhatsApp and Oculus deals than the apparent need to bring teens and gamers under Facebook’s fold. Facebook and Google are in a heated race to become international telcos. Consider the value of a service with the potential to disrupt an aging international telecommunications industry worth well over a trillion dollars. Imagine the subscriber base of AT&T, Verizon, T-Mobile, and NTT DoCoMo combined. Under that lens, WhatsApp was a steal. So, how does one become a telco?
First you start with infrastructure: drones, fiber, and airships. Investment in infrastructure in one market can lead to an advantageous beachhead when entering larger related markets. Think, for example, about the humble origins of the telco MCI, which provided coast-to-coast relay stations for truckers using CB radios in the 1960s. Today MCI is part of Verizon, the largest mobile carrier in the U.S.
With Google’s balloon-based Project Loon and drone-based Titan Aerospace and Facebook’s acquisition of Ascenta, these Internet companies are targeting regions with the least competition—those without towers or with limited connectivity, such as developing nations and medium-sized cities—as test-beds for next generation technology. [The previous sentence had stated that Facebook acquired Titan.] What happens once these new technologies are perfected and become faster and cheaper than maintaining cable? Similar to Moore’s Law and silicon, we are witness to an exponential performance curve in wireless. Look at the relative speed in which Wi-Fi has progressed in the 2000s. Now imagine a mobile fleet of drones that could be retrofitted or replaced at the speed of a Formula 1 pit stop.
Think of that time when you walked behind a building or drove past part of a highway where the signal goes dead, or you are in the crowd at SXSW and there is just too much traffic for the telcos to handle. Usually, AT&T would drive in extra trucks with cellular towers on top in order to add a few more bars back to your phone’s signal, but that takes months of planning. Imagine a system of drones that could swarm over cities like vultures, reacting in real time and seeking out locations where phones are reporting low signals before customers even notice.
So where does Oculus VR fit in? Oculus Rift is the phone. Client hardware such as the Rift, Google Glass, and the Moto 360 is required to run a service. One utility for the Rift is for tele-presence, getting experts in areas where they can’t be at an instant. However, the acquisition of Oculus means more than people in masks … Next Page »Comments (2) | Reprints | Share:
A big drop in biotech stocks set the backdrop for much of the news out of San Diego’s life sciences community this week. The tide rises, and the tide falls. But the surf is forever—at least in San Diego.
—A broad selloff in biotech stocks has prompted widespread concern that the biotech bubble is popping. The Nasdaq Biotech Index slipped after today’s opening, hitting a level that was 21 percent down from the intraday peak set on Feb. 25. For some experts, a 20 percent decline from the most recent peak means the sector is flirting with a bear market. Talk of the biotech bubble bursting has even prompted some gallows humor, exemplified by a video, “Hitler Reacts to Biotech Bubble,” a meme created from the film “Downfall.”
—San Diego’s Celladon Corporation (NASDAQ: CLDN) gained $1.22, or 11.5 percent, closing at $11.87 in regular trading Thursday, after the company said the FDA gave its “breakthrough therapy” designation to Celladon’s gene therapy treatment for patients with advanced heart failure. It is the first time the FDA has given the designation to a gene therapy program, and means the development and review of Celladon’s Mydicar therapy can be expedited, Wiklund said.
—The FDA put Halozyme Therapeutics’ (NASDAQ: HALO) pancreatic cancer drug candidate PEGPH20 on clinical hold. The move came a week after Halozyme said it had voluntarily suspended enrolling patients and dosing of PEGPH20, a pegylated formulation of its human hyaluronidase enzyme (Hylenex). An independent monitoring committee asked the company to suspend the trial as a precautionary measure until scientists can analyze whether PEGPH20 increases the potential blood-clot risks among patients taking the drug.
—Meanwhile, at the American Association for Cancer Research meeting in San Diego this week, Halozyme presented two scientific papers concerning the benefits of PEGPH20. The first showed that treating tumors with PEGPH20 enhances the action of immune-based cancer therapy such as monoclonal antibodies, according to preclinical data. The second presentation, also based on preclinical data, showed that overproduction of hyaluronan in tumor stroma enhances tumor growth, and that PEGPH20 suppresses the growth of hyaluronan-rich tumors.
—San Diego’s Vital Therapies, which is developing an artificial liver for treating acute liver failure, lowered the proposed deal size for … Next Page »Comments | Reprints | Share:
Recently, the Houston Technology Center asked me to join a panel discussion on “The Future of Telemedicine” at NASA’s Johnson Space Center. I was a bit surprised as I’ve never thought of myself as being part of the telemedicine industry. My business partner, Bryan Haardt, and I last year co-founded Decisio Health to sell software that creates a patient dashboard designed to give care-givers increased situational awareness when treating patients. In developing our product and pitching investors over the past year, “telemedicine” is not a term either of us has used to describe Decisio.
But Tim Budzik, the managing director of the technology center’s JSC campus and event host, insisted that I and Decisio were a perfect fit for the discussion, which further confused me. It did start me thinking however, on just what is “telemedicine” and could my “hip” new startup be a telemedicine company?
For the panel, we were directed to discuss “the future of telemedicine,” which struck me as funny since, to me, the concept is something of the past. To me, telemedicine conjures up a vision of a video conference between a doctor in a stuffy corporate board room and a patient somewhere remote and inaccessible. The term “telemedicine” seems quaint and a touch archaic, like a technology from the ’90s and early 2000s that came and went, like the PDA or AOL. To prepare for the panel discussion, I tried to reconcile this picture in my head with the technologies I am now seeing being developed in what I tend to think of as healthcare IT.
We are now in a world where companies like 2nd.MD can put patients in contact with an expert physician in whatever particular disease they have and setup a consultation in a matter of minutes, on a cell phone, a tablet, or a laptop—all from the comfort of their home. At MD Anderson Cancer Center, an Oncology Expert Advisor is being developed using IBM’s super-computer Watson, which is sifting through millions of data points, in order to inform patients of exactly what their best treatment options are for their specific genotype of cancer. So where does telemedicine fit into this landscape?
I realized that all of these technologies derive, in part, from “telemedicine,” a catch-all moniker that served as the foundation for current innovations like our dashboard. In addition to the video-conferencing, practitioners and policy-makers were tackling issues that are relevant to our industry today. Questions like, How does reimbursement work when the patient and doctor never actually meet? What about liability, and how does the FDA fit into all this?
Some of these answers are still evolving, … Next Page »Comments (1) | Reprints | Share:
[Corrected 4/10/14, 12:25 pm. See below.] The FDA has granted its “breakthrough therapy” designation for a gene therapy treatment in mid-stage development by San Diego’s Celladon (NASDAQ: CLDN), for patients with advanced heart failure.
The FDA notified the company in a letter sent by fax Wednesday from the Office of Cellular, Tissue and Gene Therapies, according to Fredrik Wiklund, Celladon’s vice president for corporate development and investor relations. It is the first time the FDA has given the designation to a gene therapy program, and means the development and review of Celladon’s Mydicar therapy can be expedited, Wiklund said.
Celladon sought the designation based on a long-term, follow-up study of Cupid 1, a mid-stage clinical trial that enrolled 39 patients with severe heart failure. Patients either got a placebo or a low, mid, or high dose of Mydicar through cardiac catheterization. Results from the follow-up study, released in November, confirmed initial findings that showed a dramatic, 88 percent reduction in heart failure-related hospitalizations among patients who received the highest dose of the gene therapy treatment.
After three years, the patients who got the highest dose of Mydicar still showed an 82 percent reduction in episodes of worsening heart failure and hospitalizations.
“That’s what really crystallized the strength of the data,” Celladon CEO Krisztina Zsebo said Wednesday. The safety data for Mydicar also was “superb,” and shows no drug-related toxicities, Zsebo added.
The high-dose Mydicar patients also showed an improved survival rate throughout the three-year follow-up study. Heart failure represents a large, unmet need, and the mortality rate is roughly 50 percent within five years of the initial diagnosis of heart failure, according to the company.
A second clinical trial that is intended to confirm and expand on the results of Cupid 1 began in February, after enrolling 250 patients. “For Europe, this is a pivotal study,” Zsebo said. “For the U.S., it’s still to be determined whether we need to do a phase 3 trial or not.”
Celladon’s gene therapy is intended to boost … Next Page »Comments | Reprints | Share:
Venture capitalists saw the public markets awaken in the first quarter, and they’re betting the trend will continue.
A new report from New York-based venture capital research firm CB Insights counts 35 venture-backed IPOs through the end of March, more than any single quarter since the fall of 2000. Mergers and acquisitions were also strong, with 174 deals tallied in the first quarter.
In response, investors have been pouring money into the next wave of mature companies that might make for a strong payout.
Venture investments in the first quarter were just short of $10 billion, the highest level for VC funding since the second quarter of 2001, CB Insights reports.
Overall, Series D and later financings represented a whopping 47 percent of all the U.S. venture dollars raised last quarter, a much bigger share than we’ve seen for the past year at least.
The first quarter also saw more companies cross the threshold of raising money at a reported $1 billion or higher valuation, with 11 such deals reported. That equals the number of first-time billion-dollar valuations recorded by CB Insights all of last year.
“Yes, the market is frothy,” the firm said.
Things stayed pretty close to the script in regional competition for venture deals. California leads the way, of course, with New York and Massachusetts jockeying for the No. 2 position nationally.
Texas rose to a five-quarter high in CB’s report by capturing 6 percent of the venture dollars invested nationally last quarter. Washington state’s venture funding share, meanwhile, fell after an outperforming fourth quarter.
David Schwab, a managing director at Sierra Ventures, has created a new venture fund with an unusual provision—20 percent of the capital raised will be focused on commercializing innovations coming out of UC San Diego.
Schwab, who joined Menlo Park, CA-based Sierra Ventures 18 years ago, said in a phone call yesterday that he is leading a group of UC San Diego alumni in the formation of a fund within a fund—the Triton Technology Fund within his new Vertical Venture Partners fund.
“The unique thing being done here is that the Triton accelerator fund is a wholly owned and managed fund within the Vertical Venture Partners fund,” Schwab said. The Triton fund will invest in companies and technologies invented by UC San Diego faculty, students, and alumni in software, communications, electronics, materials, medical devices, and instruments.
The new fund provides a much-needed new source of seed funding for San Diego’s innovation community, although the focus on deals affiliated with UC San Diego wouldn’t necessarily limit investments to the San Diego area.
Schwab, a UC San Diego graduate, said he would be unwinding his role at Sierra Ventures, which has been investing from its tenth fund since 2011. Vertical Venture Partners will be based in Palo Alto, CA.
Schwab declined to say whether any other VCs are joining him at Vertical Venture Partners, or how much he plans to raise. One source indicated that Schwab initially planned to raise $50 million for the Vertical Venture Partners fund, which would put the Triton fund at about $10 million. But Schwab deflected questions on fund-raising, saying, “There will be more to say about Vertical Venture Partners in a month or two.”
The effort to create a small fund dedicated to UC San Diego entrepreneurs began with Rosibel Ochoa, executive director of the von Liebig Entrepreneurism Center at the Jacobs School of Engineering. The center helps commercialize technology invented at the engineering school and educates engineering students in entrepreneurship.
In an e-mail this morning from Honduras, where she is traveling this week, Ochoa says the idea for the fund started … Next Page »Comments | Reprints | Share:
Just a few weeks ago, Facebook’s surprise $2 billion purchase of virtual reality headset developer Oculus riled up some of the startup’s earliest financial backers, who said they got a raw deal while the founders got rich.
We’re talking about pre-order backers on Kickstarter here, not investors. But if new equity crowdfunding rules had been in place, those early Oculus supporters might be singing a different tune right now.
Unfortunately, the crowdfunding envisioned by the federal JOBS Act that Congress passed over two years ago is still not a reality. However, thanks to advocates and enthusiasts, state-level equity crowdfunding is popping up all over.
The trend has strong ties to Washington, where in 2013, state Rep. Cyrus Habib introduced what may have been the first state-level equity crowdfunding bill in the nation. As an attorney who specializes in early stage companies, I’ve also been paying attention to this issue for some time—I actually might have written the first blog post advocating state-level equity crowdfunding, complete with a proposed statute, in 2012.
First, Wisconsin passed a bill. Then Michigan. And now Washington. A half a dozen other states are also considering legislation, providing enough legislative momentum to fuel a dedicated website that tracks the various proposals. (Lawyer Alixe Cormick has also written a really nice summary of the current state of play.)
So why are these laws popping up at the state level?
First and foremost, states are vying to become tech hubs, and legislators want to support startups and entrepreneurial efforts in their backyard. Legislators are carefully tracking where the investment dollars from venture capitalists and angel investors are being deployed, and are trying to attract those funds and businesses that attract those funds.
The preamble to the Washington bill does a nice job of summarizing what state legislators are trying to do:
“The legislature finds that start-up companies play a critical role in creating new jobs and revenues. Crowdfunding, or raising money through small contributions from a large number of investors, allows smaller enterprises to access the capital they need to get new businesses off the ground.
The legislature further finds that the costs of state securities registration often outweigh the benefits to Washington start-ups seeking to make small securities offerings and that the use of crowdfunding for business financing in Washington is significantly restricted by state securities laws.
Helping new businesses access equity crowdfunding within certain boundaries will democratize venture capital and facilitate investment by Washington residents in Washington start-ups while protecting consumers and investors. For these reasons, the legislature intends to provide Washington businesses and investors the opportunity to benefit from equity crowdfunding.”
Second, there is widespread disappointment over the federal law, for which the SEC still has not finalized the rules putting it into practice. Venture capitalist Fred Wilson aptly described the frustration: “Two years later, it’s as hard as ever to raise equity capital and if you aren’t rich (accredited or qualified investor status), you can’t legally participate in the world of startup investing.”
But even when we finally get federal equity crowdfunding, the federal law is not going to work—it’s too complex and too expensive. There are estimates that to raise $1 million under the federal law, companies are going to have to spend something on the order of $250,000 in intermediary (broker-dealers or registered portals), lawyer, and accounting fees. This simply won’t work for the vast majority of companies. It certainly won’t work for brand-new or naked startups.
Perhaps the federal law’s worst defect is that it forces companies to use third-party intermediaries. The SEC estimates that third-party intermediary fees will cost companies about 8-10 percent of gross offering proceeds. But startups don’t typically use third parties to raise funds, so I’m not sure why Congress wanted to force startups into the arms of intermediaries.
It’s possible that state laws won’t fall into the same trap. Washington’s bill does not require the use of an intermediary or a portal.
Why should you care? If you are a state legislator or a crowdfunding advocate, and you want to know how to make a great state equity crowdfunding law, I would recommend the one we wrote in Washington.
I believe that what we put together here will actually work for startups for several reasons. For one, it won’t be ridiculously expensive—companies will be able to start the crowdfunding process just like they do now in all accredited investor offerings under federal Rule 506. Meaning, with a little lawyer help, they will be able to get out to market to see if they can actually succeed in raising money.
So much of the trouble with various other securities law exemptions is the investment of tens of thousands of dollars in legal and accounting fees before a company even knows if it has a deal it can sell. That’s a big contrast to one of the wonderful attributes of Kickstarter and similar non-equity crowdfunding platforms: the ability to test the market. Are you proposing to build something people will actually buy? If not, it is good to know before you spend a bunch of money building it!
I believe equity crowdfunding can help transform business climates around the country. I also believe that if we continue to work on our federal legislators, perhaps they can fix the JOBS Act. But in the meantime, we can work on creating state-level equity crowdfunding laws that do the job better.
Here’s my quick checklist of what makes up a great state equity crowdfunding bill:
—Do not require startups to use a third-party intermediary. Allow companies to raise funds the way they raise money right now. Again, right now, founders go it alone. They do it themselves. They don’t hire brokers or finders.
—Do not require audited or reviewed financial statements. Startups won’t have these and won’t be able to afford them; if you require them the bill won’t work for startups.
—Require disclosure that companies can hack through without teams of accountants and lawyers and spending thousands of dollars.
—Do not impose novel or new theories of liability of directors and officers (like the federal bill did).
To prevent fraud, state laws should also require an advance filing and approval with the state regulatory agency, preclude bad actors from participating, and require companies to make ongoing disclosures to both investors and the state regulatory agency.
To make sure that people know the risks, these laws also should make sure that investors sign a statement acknowledging they know they are likely to lose their money. The Washington statute does that, and says the disclosure must be conspicuously presented at the time of sale on its own, separate page.
Will people lose their money? Sure. There are going to be companies that don’t work out. But there are also going to be success stories. It will be great for startups and founders, giving them an avenue to capital that doesn’t exist now. And people want the ability to participate, even in this risky area.Comments (2) | Reprints | Share:
Silicon Valley is one of the most dynamic engines of capitalism the world has ever seen.
For decades, technology providers focused on creating cutting-edge hardware and software designed to optimize efficiency, productivity, and data-based knowledge for large corporations. But today, many technology innovators are also working hard to level the playing field by providing individual consumers with technology platforms, online information, and decision-making support.
This move to empower individuals is not a result of the Occupy Wall Street movement; nor does it signify conflict between producer and consumer classes. Indeed, it validates Adam Smith’s theory that competitive economic individualism (which critics called “capitalism”) yields positive benefits for society, chiefly through promoting innovation and cutting costs for consumers.
Yet it also represents an acknowledgement on the part of the technology industry that increased transparency and trust, better service, and improved efficiency for consumers are essential for long-term Internet growth and general economic prosperity. This is especially important at a time when citizens are so skeptical about big business and government institutions in general, and it’s particularly topical in the wake of the financial crisis of 2008 and the recent Edward Snowden episode.
The full scope and span of the emerging “People’s Web” becomes evident when you look at some of the start-ups and growth companies that are currently flourishing and being funded. These entities can be clustered into four main groups: Transparency Enforcers; Industry Watchdogs; Cartel Busters; and Enterprise Liberators.
The groups represent four trends in the technology sector that are related, mutually reinforcing, and worth understanding as an investor. At Blumberg Capital, we have recognized and embraced these trends as a way of identifying disruptive innovations that can build large new businesses and yield outstanding investment returns.
Many investors have acknowledged the benefits of the SaaS model vs. the traditional enterprise sales model, but we think it is also worthwhile to highlight companies that are bypassing historic distributors and bottlenecks in order to reach individuals directly via social, mobile or freemium platforms. It’s worthwhile, as well, to focus on companies that are using crowdsourcing, big data aggregation, API feeds, sensor networks and algorithmic engines to deliver new and improved services—a combination that was unfeasible only a few years ago.
The rise of the individual as technology consumer and beneficiary is all the more important as emerging economies around the world boost hundreds of millions of people into the middle class. These upwardly mobile individuals are powerful, because they’re eager to pursue their economic choices across the global marketplace.
Now that I’ve laid out a basic investing thesis and rationale, let’s look at some examples and illustrations that will add dimension to my views.
Each company in this group helps protect people by making sure that they’re dealing in an authentic and transparent digital environment. Examples in this category include Quora, which brings transparency and credibility to online Q&A forums by adding social profiles, and TRUSTe, which certifies Web sites regarding data privacy policies and compliance.
In a related segment, e-commerce merchants increasingly seek consumer feedback, because customers trust other customers. That said, there is a growing problem with fake online customer reviews. With a view to solving this problem, Blumberg Capital invested in YotPo, which automatically solicits and verifies reviews from customers (with transparent social profiles), ranks them by credibility, and shares them across search engines and social networks. Another of our investments in in this category is Trulioo, which improves transparency and protects consumers by authenticating real users and denying fraudsters in real time by validating social profile information.
This group helps protect people by shining a light on hidden cost structures, opaque business practices, or arcane processes. Familiar brands in this segment include traditional not-for-profit organizations such as the Council of Better Business Bureaus and Consumer Reports. More recently, technology companies are harnessing crowdsourcing and comparison analysis to reduce information asymmetry between seller and buyer. For instance, FeeX, an early-stage company in our portfolio that calls itself “The Robin Hood of Fees,” aggregates and analyzes objective, crowdsourced data to reveal … Next Page »Comments (1) | Reprints | Share:
The U.S. saw slightly fewer businesses created last year, but there’s a silver lining: the poorer numbers nationwide likely indicate that a stronger job market relieved some of the pressure on people to start companies out of necessity.
That’s among the takeaways from the latest Kauffman Index of Entrepreneurial Activity, an annual study from the Kauffman Foundation.
An average of 0.28 percent of adults nationwide, or 280 per 100,000, started new businesses each month in 2013. That was down from 300 per 100,000 adults nationwide, or 0.3 percent, the previous year. The 2013 entrepreneurial rate is a return to the pre-recessionary level of 2006, which is more in line with historic rates, the study says.
The Kauffman study also found that 78.2 percent of new entrepreneurs last year had not recently been fired from a job, 4 percentage points higher than at the end of the recession in 2009. While it’s not a flawless link, the study says this measure can suggest that the overall jobs market is improving and forcing fewer people to take the entrepreneurial leap.
Entrepreneurship rates decreased across all U.S. regions last year, with the highest entrepreneurial activity in the West and the lowest in the Midwest. (It’s important to note that the study looks at manufacturing, construction, trade, services, and “other” industries—not just the high-growth tech companies often associated with entrepreneurship.)
Wisconsin’s entrepreneurship rate tied with Washington for 46th in the country, at 170 new entrepreneurs per 100,000 adults last year, or 0.17 percent. Wisconsin’s ranking improved from last year’s study, when it tied with Michigan for 48th place, but its entrepreneurial rate declined from 180 per 100,000 adults, or 0.18 percent, in 2012.
Wisconsin also saw one of the largest declines in entrepreneurial activity over the past decade, with a decrease of 0.08 percent. That’s despite plenty of talk by Wisconsin politicians about the importance of entrepreneurship, a surge in angel investment groups, and a flurry of new organizations and publicly funded initiatives aimed at fostering startups.
“The good news is you can’t fall out of a well,” joked Joe Kirgues, who co-founded the Wisconsin-based startup accelerator gener8tor in 2012. “From the venture perspective, we see promising signs of new growth in this state, but this is a fresh reminder that we have a very long way to go until we consider these efforts a success.”
He sees promise, however, in the “money for minnows” strategy by the state and venture capital communities, which means making small investments in a lot of early-stage companies. “Like a baseball farm system, it will take a few years to pay off, but the major league results should be there,” Kirgues said.
Ryan Murray, deputy secretary and chief operating officer of the Wisconsin Economic Development Corp., pointed out that the Kauffman study is “simply a snapshot of where things stand now based on a very limited set of federal data.” He emphasized the state-sponsored programs that have been enacted in recent years to … Next Page »Comments | Reprints | Share:
For the past two years, Xconomy has held an invitation-only event in the heart of California wine country with a general focus on the economy, emerging technology, competitiveness, and jobs—and spanning the range of topics we cover, from information technology to life sciences, healthcare, energy, cybersecurity, food, and much more (read on). We convene some of the leading innovators in the country, and some of the best attendees, too—almost all of whom could easily take the stage themselves.
It’s my favorite event of the year—and Napa Summit 2014: The Xconomy Retreat on Technology, Jobs, and Growth is shaping up to be the best summit yet. I hope you can make it. Below are the details and how to request your invitation.
This year’s Napa Summit will take place on June 2 and 3. There’ll be a wine tasting and dinner at the amazing Silver Oak vineyard on the 2nd, with the event itself taking place the next day at the Villagio Inn and Spa. We’ll have plenary talks, chats, and interactive panels, along with three special focus sessions in design, food technology, and connected devices. And plenty of wine.
Our all-star lineup this year includes: Rick Wagoner, former CEO of General Motors; genomics pioneer Lee Hood; Electronic Arts founder Trip Hawkins; Mick Mountz, founder and CEO of Kiva Systems; Indiegogo co-founder Danae Ringelmann; Ric Fulop from North Bridge Venture Partners; TaskRabbit founder Leah Busque; cybersecurity expert Brian White of The Chertoff Group; former frog design executive creative director David Merkoski; and Minerva Project founder and CEO Ben Nelson. And that’s just to name a few.
You can find all the speakers so far and request your invitation here (read on for a few more details).
June 2: Silver Oak Vineyards
Registration and cocktail reception begins 5:30 PM
Vineyard tour and dinner commences at 6:30 PM
June 3: Villagio Inn & Spa
Program from 8:15 AM to 3:45 PM
We only have room for about 75 attendees at this invitation-only event. Early bird registration is $1,195 (you can apply for a discount if you’re from a government organization, non-profit, or startup, or you are a student), and includes wine reception, vineyard tour, and meals (lodging is separate).
Again, to request your invitation—and for more event information, including the full list of speakers to date—please visit our Napa Summit event listing here.
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There has been a bit of action for a while now in the crowdfunding world, and certain startups have been able to get themselves off the ground using Kickstarter, Indiegogo, and similar sites. By and large, these types of financings have gone to companies that are building physical products, digital games, and the like. Fundings have also happened for some causes, films, books and art projects that are typically not businesses. Equity crowdfunding has been signed into law in the U.S. through the JOBS Act, but it awaits the SEC’s directives on the precise rules governing the system. In Europe, it is legal and already in practice. Hopefully, other parts of the world will also start seeing the infrastructure develop shortly.
For our domain of focus at 1M/1M, the primary concern is financing digital startups: technology and technology-enabled services. Typically, these are difficult to assess, high-risk companies, and amateur investors from the “crowd” are unlikely to be able to perform adequate due diligence to have a sophisticated investment thesis.
However, there is one category of investors who will have an excellent vantage point from which to assess new ventures.
I am talking about customers.
Daniel Cane, co-founder of Blackboard, is doing a new company in healthcare IT that he has ”crowdfunded” from customers. Technically, it is not crowdfunding as in the financing was not completed on Kickstarter or a similar site. However, Daniel raised the funding from a bunch of doctors who were enthusiastic about his product and wanted to invest. This converted customers to investors, massively enhancing their stake in the game, and incentivizing them to promote the product to large numbers of other doctors who are likely prospects for the company. (Read our Modernizing Medicine case study.)
A full-fledged implementation of equity crowdfunding, I believe, will vastly scale the opportunity for entrepreneurs to engage their customers as investors.
In fact, all sorts of strategic players who can make a company successful, can take a stake in it: potential channel partners, analysts, domain experts who want to play across a set of companies in their core expertise area.
This is really exciting!
You may ask, where does that put VCs and professional angels?
Well, the ”crowd” is not good at leading financing rounds. Even so-called angels often don’t know how to lead rounds. I would argue the number of investors who know how to lead a round is quite small.
However, to raise an equity financing round, you need a lead investor to set a valuation and issue a term sheet.
Savvy entrepreneurs will, most likely, work with savvy VCs and angels to set the terms and then invite their customers, partners, and strategic influencers to participate. Savvy VCs and angels will recognize the value of having these strategic players in the round, and will not object. After all, everyone makes more money if the company has more levers to push on to accelerate growth.
In a sense, what we’re projecting here is a small-scale private placement round that could include a few hundred investors, or may be, a few thousand.
This is not easy to manage. It is not viable for an entrepreneur team to go personally meet a few thousand geographically diverse investors and answer their questions personally. Most of the process will need to happen online. The role and credibility of the lead investors remain significant drivers in the financing game. Amateurs will look for the professionals to lead.
This will remain the primary bottleneck for the scaling of equity crowdfunding as a solution to the seed capital gap that startups face today.
At least for a while, the people who will take true advantage of equity crowdfunding are the “insiders.” Even the new online equity-crowdfunding marketplaces such as OurCrowd or CircleUp only admit “accredited” investors—those with such a high net worth that they can afford to lose their money. In that sense, crowdfunding will, likely, not democratize startup financing to that extent. However, it will create the opportunity for a much larger set of investors to play.Comments (1) | Reprints | Share:
[Corrected 4/8/14, 12:15 pm. See below.] It was a relatively quiet week for San Diego’s life sciences community. Here’s my wrap up of the latest developments over the past week.
—The share price of San Diego’s Halozyme Therapeutics (NASDAQ: HALO) fell by $3.16, or 27 percent, in heavy trading Friday, after the company said it had suspended a mid-stage pancreatic cancer trial of PEGPH20, a pegylated formulation of its human hyaluronidase enzyme (Hylenex) as a “precautionary measure.” Halozyme said an independent data monitoring committee asked for the pause until it could determine if the drug increases the risk of blood clots in participants receiving PEGPH20. Halozyme specializes in a family of human enzymes that are used as adjuvants to increase the absorption of biologics, drugs, and fluids in tissue.
—[Corrects plaintiff to Neurovision Medical Products instead of National Medical Products] NuVasive (NASDAQ: NUVA), a San Diego a medical device company that has developed minimally disruptive surgical products and procedures for the spine, said a federal jury in Los Angeles rendered a $30 million verdict against the company over its use of “NeuroVision” as a trade name. The company said it strongly disagrees with the verdict, and intends to seek a new trial, or to have the judgment overturned on appeal. The claim filed by Ventura, CA-based Neurovision Medical Products (NMP) began five years ago when Neurovision Medical broadly alleged that when NuVasive was a start up, it deliberately appropriated for itself the goodwill associated with Neurovision Medical’s established trademark. NuVasive said it does not anticipate the verdict will disrupt its sales or ability to meet demand.
—San Diego’s Lumena Pharmaceuticals filed for a $75 million IPO, just a few weeks after raising $45 million in venture funding. The three-year-old startup specializes in developing drugs for treating a rare group of metabolic disorders that cause bile acid to build up in the liver, leading to a variety of unusual liver diseases that can progress to liver failure. Lumena says bile acids are increasingly being recognized as signaling molecules that regulate metabolic processes. By blocking a … Next Page »Comments | Reprints | Share: